The Prime Minister spoke to MPs after the European Council failed to reach a deal on the EU's budget for the next seven years.

He said another deal is "do-able" but the EU's proposals had been "simply not credible".

"When it came to the bureaucratic costs of the European Commission, not a single euro in administrative savings was offered, not one euro," said the prime minister.

"We need to cut unaffordable spending. The deal on the table was just not good enough and that is why we - and others - rejected it."

He said the EU must be more open to cutting billions from pay and pensions.

"There is simply no excuse for not taking a much tougher approach towards the EU’s administrative costs," he said. "The EU institutions have simply got to adjust to the real world."

Talks over the EU budget collapsed on Friday, as Mr Cameron pushed for a freeze in line with inflation, while other nations wanted an increase.

France, a net contributor, had also opposed cuts in the Common Agricultural Policy of farm subsidies, and pushed for cuts in the British rebate.

But fatally for the French position, Germany’s Angela Merkel refused to back President Francois Hollande, instead siding with Mr Cameron over the need to make cuts in EU bureaucracy.

Responding for Labour, Ed Miliband accused Mr Cameron of presising over chaos within his own party, as senior Conservatives "undermined" the official position on Europe.

"The Prime Minister has said repeatedly he is in favour of Britain remaining a member of the EU, but why is he allowing his colleagues to take the opposite position?" Mr Miliband said.

"Last month, the Education Secretary [Michael Gove] briefed that he is open to leaving the EU, on Saturday the chairman of the Conservative Party [Grant Shapps] said we should threaten to leave if we didn't get a good deal, and now we have the new vice-chair of the Conservative Party [Michael Fabricant] touring the studios not about a budget deal, but a deal with the UK Independence Party."

"It's no wonder that everyone from British business to our European allies believe we are drifting towards the exit door."